The investment expenditure of an economy changes by N2 million and MPC is 0.75. What is the change in income?

A. N0.5m
B. N1.5m
C. N2.6m
D. N8.0m

Correct Answer:

Option A – N0.5m

Explanation

MPC is a proportion of an aggregate raise in pay that a consumer spends on the consumption of goods and services, as opposed to saving it.

Investment expenditure = 2,000,000
MPC = 0.75
0.75 x 2,000,000 = 1,500,000

change in income = 2,000,000 – 1,500,000 = 500,000